As detailed in its interim results to 30 June 2018, profit before tax for the first six months of the year was £2.1m, “despite having absorbed £0.3m of professional fees incurred” as part of the review.
Profit in line with expectation
One cloud on the horizon was that, during the second half of 2018, the group’s other life company, STM Life Assurance PCC, incurred a number of one-off costs in relation to uncollectable policy fees amounting to £0.2m, as well as a policy cancellation and closure exercise for uneconomical policies amounting to £0.1m.
Additionally, there has been a reduction in the forecasted new business pipeline to the year end by £0.2m, reflecting a timing delay in some policies not likely to incept until 2019.
However, the STM board stated that it, “remains confident that the group will report overall profit before tax for 2018 in line with its previous expectations, with underlying profit before tax (excluding the impact of profits from reserve releases and one off costs) expected to increase year-on-year”.
Historical tax issues
Deloitte’s skilled person’s review looked at the compliance and governance of the cross-border financial services provider, particularly the way in which STM dealt with financial advisers and their clients.
The group came under fire at the end of last year when its chief executive, Alan Kentish, and a Gibraltar-based colleague were arrested in relation to tax issues dating back to 2015.
At the beginning of 2018, STM moved its headquarters from Gibraltar to London, and earlier this month the Gibraltar Police investigation was closed with no charges made against either Kentish or his colleague.
Deloitte’s review of STM’s Gibraltar business was completed in 2018 and the group said it have implemented the recommendations the professional services group made in its report.
Profitability hit but improved robustness
“We are pleased with the underlying trading of the group for the year-to-date, which demonstrates steady growth against our previous year” said Kentish. “The year so far has seen significant change, and it is apparent that we have experienced a number of material one-off costs as well as ongoing costs as part of our enhanced governance, both of which will impact our profitability but make our businesses more robust.
“Despite these headwinds, the growth in our underlying business and the anticipated release of the technical reserve mean we remain confident of being in line with management’s expectations of overall profit before tax for the full year.”